LSM v. CMP

FCMC 7040/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7040 OF 2011

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RULING
(Leave to Appeal)

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The Application

1.  This is an application on the part of the respondent husband for leave to appeal against my judgment given on 19 September 2014 (“the Judgment”) in respect of his ancillary relief application.   

2.  For convenience, I shall continue to adopt the same nomenclature that I used in the Judgment.  Thus, I continue to refer the petitioner wife as “W” and the respondent husband as “H”.

3.  In the Judgment, I awarded H a lump sum of $900,000 which is about 14% of the matrimonial assets at the time of trial.  However, for the reason that W has been able to achieve a sum more advantageous than her open offer, I ordered H to pay one-third of W’s costs of the ancillary relief proceedings. 

4.  Dissatisfied with the outcome, H seeks leave to appeal.  On the face of it, his application was taken out more than 28 days after the Judgment but it was still within time because of the legal aid stay in the interim arising from his application for legal aid. 

5.  H’s application was originally fixed to be heard on 19 March 2015 but was postponed due to the downturn of W’s health.  What happened was that W met with an accident at home in October 2014 and was sent to hospital.  Her condition since then had deteriorated and she became mentally incapacitated.  The youngest son TK had to suspense his final year in the university and return to Hong Kong for the purpose of acting for his mother as her next friend in the proceedings.  He is also granted legal aid in the defence of the application. 

6.  It is sad to see that the mishap and the events that followed have not been able to stop the present proceedings.

The Legal Principles

7.  The parties have no dispute over the applicable legal principles.

8.  The relevant test governing applications for leave to appeal from the District Court is provided in section 63A(2) of the District Court Ordinance (Cap 336) (“the DCO”):

“Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that –

(a) The appeal has a reasonable prospect of success; or

(b) There is some other reason in the interests of justice why the appeal should be heard.” [emphasis added]

9.  The Court of Appeal discussed the application of s 63A(2) of the DCO in Sunny Tadjudin v Bank of America, National Association, HCMP No 691 of 2012, unreported, 29 June 2012 at paragraphs 8 – 10:

“8. Under section 63A(2) of the District Court Ordinance, Cap 336, leave to appeal to the Court of Appeal shall not be granted unless the Court of Appeal is satisfied that the appeal has a reasonable prospect of success, or that there is some other reason in the interests of justice why the appeal should be heard. Counsel relies on both limbs in section 63A(2) in seeking leave to appeal.

9. Reasonable prospect of success involves the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable” (SMSE v KL [2009] 4 HKLRD 125 para 17). Furthermore, it is pertinent to bear in mind that even if there is a reasonable prospect of success on appeal, the court still retains a discretion whether to grant leave to appeal, although the fact that there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion (Ho Yuen Ki Winnie & Ors v Ho Hung Sun Stanley & Anr. HCA 391/2006, 25 May 2009, A Cheung J para 3; and HCMP 1009/2009, 24 August 2009, para 22).”

The Respondent’s Intended Grounds of Appeal

10.  As I have already set out the parties’ case and the finding of facts in the Judgment, I do not propose to repeat them here.  As a matter of fact, there is no challenge on any of the findings made by me.  Reference to the relevant parts of the Judgment will be made as and when necessary. 

11.  There are 8 grounds in the Draft Notice of Appeal.

Ground 1

12.  H argues that I have wrongly exercised the discretion in giving an award of $900,000, which is slightly below 14% of the total family assets.  The award is even lower than the open offer made by W at the beginning of the trial which was $1,100,000 plus costs to be taxed if not agreed (para 43 of the Judgement).  

13.  Ms Tsui, for H, submits that it is wrong for the court to award a figure below the open offer.  W must have taken into account her present assets, her future needs and H’s needs for future accommodation in the face of eviction by W’s brother (referred to as “LYM” in the Judgment) after the divorce.  She is bound by her open offer without exceptional circumstances.  Therefore, the baseline is for the court to award H the open offer.  

14.  To start with, I do not think there is anything as a matter of law that the court in an ancillary relief proceeding is bound by the open offers of the parties.  

15.  Mr Leung, for W, argues that the court is not bound by the approach taken by the parties.  He refers me to the Court of Appeal judgment in L v C [2007] 3 HKLRD 819 where Stock JA (as he then was) said in para 22:

“22. The judge was entitled to adopt an approach that was independent of either that had been advanced by the parties:

“The quasi-inquisitorial role of the judge in ancillary relief litigation obliges him to investigate issues which he considers relevant to the outcome even if not advanced by either party.  Equally he is not bound to adopt a conclusion upon which the parties have agreed.”

per Thorpe LJ in Parra v Parra[3].

16.  Although in that case the Court of Appeal was dealing with the implication of a nuptial agreement, as I see it, the same principle applies.  If a family judge is entitled to adopt an approach that is independent of the parties, and as a consequence, he has come to a different figure, a figure that is lower than the open offer, I see no reason why he cannot do so if the circumstances warrant. 

Ground 2

17.  On this ground H argues that I have failed to take into account, in the identification of assets for distribution, the sale proceeds of $3,350,000 that W pocketed as the developer of the 47E House.   If this sum is added to the pot the total family assets available for division would be $9,790,000 and not just $6,440,000 as found by the court.

18.  Ms Tsui contends that the correct approach is to put this sum back to the matrimonial pot before division subject to achieving a right balance after considering all the other factors.  The court should consider whether W’s expenses were reasonable during the period and then decide whether to exclude the whole sum or part of it.

19.  With respect, I do not agree.

20.  The 47E House was developed and sold for $3,350,000 in September or October 2001, some 12 years prior to the trial.  I had already considered and determined whether $3,350,000 was available for distribution when I considered whether W had any hidden assets.  At paragraph 186 of the Judgment, speaking of whether W had any hidden assets, I said as follow,

“186. However, I believe these assets are not too substantial. W has not been working for many years. Whatever monies she had retained or gained from PK, the Uptown Property and the development of the 47E House were subject to depletion as times went by and together with the fact that she had been supporting TK’s education. Accurate figure can never be known. Doing the best I can, I would put it at $500,000. I find that she has undisclosed assets of at least $500,000.”

21.  As said, the intended appeal is not concerned with any facts found by the court.  It is clear that according to my findings I had already included the sale proceeds, if any were left, in the matrimonial pot.   In any case, the level of W’s spending or its reasonableness was never raised and was not a subject of dispute in trial. 

22.  I conclude that H has no reasonable prospect of success on this ground.

Ground 3

23.  H submits that while I am correct to accept that the “principle of sharing” should apply in the present case when the marriage is undoubtedly a long one, when the family assets exceed the basic needs of the parties; and when the parties are in agreement that the yardstick of equality should apply (paragraphs 47 and 210 of the Judgment), I erred in deviating from the principle of sharing when doing the actual division.

24.  Ms Tsui emphasizes that in the present case the parties have already agreed to share the family assets equally. What is in dispute is the size of the matrimonial pot only.   She submits that the court was bound by the agreement.  That was how the parties conducted their case in trial and throughout they never withdrew from this agreement.

25.  Again, Mr Leung draws my attention to what Stock JA (as he then was) has said in L v C [2007] 3 HKLRD 819:

37.  When parties who are sui juris freely enter upon a bargain for the division of matrimonial assets then, absent unfair or unconscionable factors attaching to the circumstances in which that agreement came to be concluded and absent unforeseen circumstances arising after the conclusion of the agreement such as to cause manifest prejudice to one of the parties, the courts will hold the parties to their bargain.  For reasons of policy, the courts will not permit the parties by agreement to oust the jurisdiction of the court in matters touching upon matrimonial finance or to control the exercise of the court’s jurisdiction once that jurisdiction is invoked (Hyman v Hyman), and the courts will be astute in maintaining their supervisory jurisdiction (Pounds v Pounds) even in the absence of provisions seeking to oust jurisdiction.  In matrimonial matters, the courts have a particular role in ensuring protection for parties to a marriage that has broken down.  The fact that there has been an agreement for the division of assets is not of itself determinative of an application, for the statute enjoins the court to have regard to all the circumstances that prevail at the time the court is required to make its determination for ancillary relief, and an agreement is but one of those circumstances, though it may transpire to be an important one…(emphasis added)  

26.  Mr Leung submits that in the present case there was no agreement of equal division in place.  The 50% sharing was just an open offer.  Even if there was, the court was not bound by it if justice demanded a different dispensation.   The court in the exercise of its supervisory jurisdiction might well interfere.  

27.  I agree with Mr Leung.  I have already made the point in paragraph 211 of the Judgment that the family court has an inquisitorial role and a very important factor that must be taken into account for departure from equal division is the delay in the ancillary relief proceedings.

28.  For these reasons, I do not find any reasonable prospect of success on this ground.

Ground 4

29.  H says I have unduly found him to be solely responsible for the ‘delay’ in making an application for ancillary relief. 

30.  Ms Tsui argues that notwithstanding that physical separation took place around 1994 when W and TK moved out of House 52, it was common ground that H continued to live with W’s mother and took care of her solely until the latter died in 2001.  How the parties would like to conduct their lives is their choice.  Some parties never have a divorce.  In the present case, there was no separation agreement. There was no understanding that the separation would have led to a divorce.  H did not realize that there would be a divorce.  W only filed her petition for divorce in May 2011.  If there is a delay in ancillary relief, both parties are to be responsible and not just H alone.

31.  It seems clear to me that the question is not whether there was any agreement or understanding as to separation and whether the ultimate result was a divorce.  As I said clearly in paragraph 213 of the Judgment, “H could have taken out a petition for divorce and applied for ancillary relief in the last 20 years.  That aside, where appropriate, it would also be open to him to apply for maintenance under the Separation and Maintenance Orders Ordinance, Cap 16.”  The delay is not on the petition for divorce, the delay is on the application for financial relief.  I agree with Mr Leung that W essentially did not have any application for ancillary relief. The ancillary relief she initially asked for was a misconceived one (Paragraphs 8 and 207 of the Judgment).  I have no doubt that the ill-advised application was taken out merely as a response to H’s application.

32.  For this reason, I have to reject this ground.

Ground 5

33.  In his draft Grounds of Appeal H says I have wrongly interpreted the impact of “delay” by relying on S v S [1989] FCR 582, [1990] 2 FLR 252 where there was 9 years’ delay between ancillary relief application and the decree absolute and not a long separation period before petition for divorce as in this case.  Also, I am wrong to find long separation is a ‘magnetic factor’ as in Gordon (formerly Stefanou) v Stefanou [2011] 1 FLR 1582 in exercising my discretion.

34.  During the hearing, Ms Tsui clarifies that the court is entitled to give regard to the ‘delay’ between separation and divorce petition.  With this clarification, whether or not S v S is the appropriate authority is not in issue anymore. 

35.  On the magnetic factor point, Ms Tsui argues that the present case is distinguishable from Gordon (formerly Stefanou) v Stefanou [2011] 1 FLR 1582.  In that case, the parties separated in 1996 and the wife petitioned for divorce in 2003 on the ground of 5-years’ separation.  3 years after separation, the husband set up a company and progressed to substantial scale.  Ancillary relief order was given in 2007 but the wife sought to set aside further business transaction of husband’s company in 2010.  Her application failed because of the physical separation and during the intervening period the husband’s business developed without any form of support or contribution from the wife.  The separation coupled with the husband’s success afterwards was considered a magnetic factor in this particular case. Ms Tsui contends that the court has no basis to find separation a ‘magnetic factor’ in the present proceedings.  There is simply no substantial wealth accumulation after separation other than value appreciation of existing family assets. 

36.  That said, Ms Tsui concedes that where appropriate, long separation could be a magnetic factor but she maintains that it could not be such in this case.

37.  Each case depends on its own facts.  It is true that there was no substantial wealth accumulation after separation by W independent of H but this does not necessarily mean that long separation cannot be a magnetic factor.  It is not necessary for me to rehearse the relevant paragraphs of the Judgment here.  It suffices for me to say that in paragraphs 218 to 228 I set out and analyzed H’s post-separation evidence.  I only need to refer to paragraphs 226 to 228:

226. In evidence, he admitted that all along he did not care at all how P (sic) disposed of the Land.  Likewise, he did not care whether or not P (sic) had given the RP Lot away and had not taken any action over all these years even when he was under CSSA.  All in all, upon his own admission, the reality is that despite the fact that he knew of W’s taking the money and in control of the landed properties and his own financial predicament, he chose not to raise any issues over all these years.  That said, he explicitly stated that he wishes to get as much as he could from W in the present proceedings because it was the money he earned and he wanted to air his grievances (“為啖氣”).  

227. Despite his admission that he is not interested to live in the 47D House, he is seeking 2 floors of it and he said he would just liquidate it for money.  He would possibly donate the money to orphans.

228. Finally, despite his alleged absence of interest in W’s assets, he has been fighting the ancillary relief proceedings up to its end.  He has taken issues on nearly every aspect, yet he remained silent over all these years.

38.  It was based on H’s own evidence and admission that I came to the conclusion in paragraphs 229 to 231,

229. Thus analyzed, I am drawn to the conclusion that the long interim between separation and the proceedings is an outstanding feature of this case and is the magnetic factor influencing how the discretion of the court is to be exercised: see Gordon (formerly Stefanou) v Stefanou, [2011] 1 FLR 1582, at para 22.

230. H had been contented with the situation for nearly 20 years. He chose to take no action to assert his right over all these matters and now it seems to me that he grabbed W’s divorce petition as an opportunity to ride on it in order to perpetuate his wishes.  After having heard what he said in court, to me it would appear that what H wants is more of retribution on W rather than anything.  If he does not care what W has, why does he care to fight?  At the end of the day, the ultimate question is, W and TK have been having their own way of life for the last 20 years, is it equitable or just to have their lives turned upside down just because of H’s vindictive desire?  It is glaringly apparent that he aims at destroying.  To me, the answer must be a resounding “No”.

231. I am therefore driven to the conclusion it is only right that there is a departure from equal division.

39.  Clearly, what I have given regard to and what I have taken into the balance is not just the long separation or the delay but also the reason for the delay and the very reason coming from H’s own mouth as to why he sought for ancillary relief 20 years later.  There is nothing from Ms Tsui that I have wrongly applied the impact of the delay when carrying out the balancing exercise.  She has not demonstrated how my reasoning was flawed so much so that the long separation coupled with H’s own admission cannot be a magnetic factor.

Ground 6

40.  H says I have failed to pay heed to the fact that, had there been any delay in his application for ancillary relief, W has actually had the benefit of using and enjoying the marital assets during the time of separation.  Ms Tsui highlights that W has been benefitting from this long period of separation in which she at least occupied and enjoyed the House 47D. 

41.  I was of course fully aware that W and TK had been occupying the House 47D as their accommodation throughout all these years.  The answer to this criticism is that according to my finding on the basis of H’s evidence, it was H’s own delay that allowed this to have happened.   It was he who chose not to raise issues in all these years. It was his own admission that he was not interested in living in the 47D House but elected to stay in No 52 House. 

42.  I am not persuaded that there is a reasonable prospect of success on this ground.

Ground 7

43.  H says I have erred in finding the only aim of H’s application for ancillary relief being to “destroy” the lives of W and TK and I have confused how H might spend his award from ancillary relief application with his legal entitlement.

44.  On the first point that H’s aim is to “destroy”, there are abundance of evidence from H himself as set out in paragraphs 218 to 231 of the Judgment in support of the finding that what he wants is more of retribution on W rather than anything.  Ms Tsui has not been able to illustrate how I erred in coming to this conclusion.

45.  On the second point, Ms Tsui argues that while H has been on CSSA since around 2002 and has been living on a very modest lifestyle and was contented for the past 20 years, it does not mean that he is therefore not entitled to a division of matrimonial assets upon divorce.  Even if during separation H was not keen about the business of PK and the interest in the lands, it does not mean that those would cease to be matrimonial assets in which he made his contribution over the long period of marriage and in which he would have a share.  He might have his own idea as to how to spend the award such as making a donation to orphans.  His intention as to how to spend the money is a separate consideration from his legal entitlement.

46.  Ms Tsui also refers me to the case of WSW v YKK, CACV 388/2007 (date of judgment:  30 June 2008) where the couple there separated for 10 years before the divorce proceedings.  The Court of Appeal divided the family assets in the proportion that the wife was to have 60% and the husband was to have 40%. 

47.  In KWC v LYY, FCMC 14968/2006 (date of judgment: 31 July 2009), there was a lapse of 8 years between separation and divorce petition and the husband was given 45% of the family assets. 

48.  And finally in MKK v YSM, FCMC 11948/2010 (date of judgment:  23 June 2015), a case heard by me, the husband was given 45% of the family assets when at the time of the trial he had separated with the wife for 15 years.  Before separation, the marriage lasted for 28 years.

49.  Ms Tsui says in light of all these cases, I was too harsh on H in awarding him just about 14% of the family assets.

50.  It is trite that there is no legal entitlement unless and until there is adjudication by the court.  I do not think Ms Tsui has gone so far as to say that H’s financial needs are not a relevant factor to be considered when it comes to division of the assets.  H’s needs for his living expenses and also his “needs” or “wishes” for making a donation to orphans must be weighted and balanced in light of the needs of W including her financial responsibility towards TK and also in light of the long marriage and the long separation.  This is what I have done and as a matter of fact, I have given due consideration to H’s needs before coming to his “entitlement”.  

51.  On the cases cited by Ms Tsui, although it is axiomatic that the facts of each case are different and so lead to different division of the assets, I do accept that there is some room for argument that the discretion exercised by me might have fallen “outside the generous ambit within which a reasonable disagreement is possible”:  Hong Kong Civil Procedure 2015, para 59/0/53 and 59/0/54.  In the final analysis, it is at least arguable that I might have given too much weight on H’s intention to ‘destroy’ and on his own peculiar plan as to how to use his monies, given that the starting point in this case should be equal division.  I consider that this ground is more than ‘fanciful’.  I will give leave to appeal on this ground.

Ground 8

52.  H contends that I have failed to give proper consideration and weight to W’s litigation conduct:

(1) She has not made full and frank disclosure in the entire process.  This will militate against her alleged financial needs.  The court should have drawn adverse influence when a party is found to have failed to make full and frank disclosure and have hidden assets.

(2) Her attempt to portray a picture that she is insolvent; the court has found that all her alleged loans (up to around $7,700,000) are not genuine loans.  This is an obvious attempt to mislead the court and H.

(3) Only on the first day of trial that W withdrew her application for ancillary relief against H when the court found that to be wholly unmeritorious and misconceived.

53.  On the top of the above, Ms Tsui submits that W lied about transferring RP Lot to YS as a marriage gift (paragraph 80 of the Judgment), that the Uptown sale proceeds were returned to PK (paragraph 59 of the Judgment), that she was not the developer of the House 47E (paragraph 72) and about her limited involvement in the business of PK.

54.  I only need to be brief on this ground.

55.  Mr Leung contends that the conducts complained of are litigation conduct and not marital conduct.  He refers me to the Court of Appeal judgment in LSY v HTF [2013] 2 HKLRD 1233 where according to the headnote, it was held that a distinction should be drawn between marital misconduct and litigation misconduct.  Only the former could justify a departure from equal division of the total assets between the parties, unless there were exceptional circumstances where the litigation misconduct was so extreme that it would be inequitable to disregard it.  Litigation misconduct would usually be sanctioned by orders for costs.

56.  The conducts complained of are litigation conducts and not marital conducts.  It was in light of W’s litigation conducts that she was given one-third of the costs only.  Ms Tsui has not gone so far as to say that there were exceptional circumstances.

57.  For this reason, I do not find any reasonable prospect of success on this ground.

Conclusion

58.  For the reasons aforesaid, I give leave for the respondent to appeal against the Judgment on Ground 7 of the Draft Notice of Appeal.

59.  As for the costs, they should be in the cause of appeal with counsel certificate.  The parties’ own costs to be taxed in accordance with Legal Aid Regulations.  This is by way of an order nisi.